Sugar stocks are in focus on Thursday, January 16, following reports of a potential increase in ethanol prices, with most sugar stocks trading higher on Thursday.
Dalmia Bharat shares are trading a percent higher on Thursday's trading session at ₹1,758, meanwhile, Shree Renuka Sugars stock is nearly 4 per cent up today, touched intraday high to ₹38.18.
Triveni Engineering and Industries is trading 3 per cent higher at ₹411.40 per share. Rana Sugars Ltd. saw a rise of 3.97 per cent, Bajaj Hindusthan Sugar Ltd. increased by 3.87 per cent, and Mawana Sugars Ltd. gained 3.84 per cent.
Dhampur Sugar Mills Ltd stock. saw a rise of 5.63 per cent, while Magadh Sugar & Energy Ltd. experienced a 5.42 per cent increase.
As reported by various media outlets, the Union Cabinet is likely to approve a proposal to raise ethanol prices in its meeting today. The cost of ethanol made from B-heavy molasses is expected to go up, along with an anticipated increase in the price of ethanol derived from sugarcane juice.
"We will achieve this target of 20 per cent ethanol blending in the next two months. The use of E20 (petrol with 20% ethanol) will help in reducing pollution," Union Minister Nitin Gadkari said while speaking at an event.
In 2023, Prime Minister Narendra Modi introduced the initiative for 20 per cent ethanol-blended petrol (E20), starting with 15 cities. Ethanol, derived from sugarcane, broken rice, and other agricultural products, is anticipated to reduce India's heavy reliance on oil imports, as the country currently sources 85 per cent of its oil from abroad.
The use of E20 is expected to lower carbon monoxide emissions by approximately 50 per cent in two-wheelers and 30 per cent in four-wheelers compared to pure petrol (E0).
India achieved an average 10 per cent ethanol blending in June 2022, ahead of the original target of November 2022. Automobile engines can operate on E20 with minor modifications, such as enhancements for corrosion resistance.
“Sugar prices are skyrocketing today as the market expects a hike in ethanol prices in an upcoming cabinet committee meeting. Amid soaring crude oil prices, the Government of India (GoI) is expected to curb its dollar expenses by increasing ethanol blending. Hence, the GoI is expected to increase B-heavy and C-heavy molasses prices in the cabinet meeting, which may benefit sugar-maker companies,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.
Anshul Jain, Head of Research at Lakshmishree Investment and Securities believes that the market is trying to discount this benefit through strong buying in sugar stocks.
“The GoI is highly ambitious in its ethanol blending plan, aiming to at least double the ethanol blending in crude oil from current levels. As oil maker companies depend heavily on sugar molasses for ethanol blending, any hike in B-heavy, C-heavy, or both molasses is expected to have a positive impact on the balance sheets of sugar market companies. That way, the market is trying to discount this benefit through strong buying in sugar stocks.”
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